Today I want to share with you important information about credit scores. More importantly, I want to tell you what is the highest credit score possible.
How Credit Scores Work
The first thing you need to know is that your credit score is actually a score that gets reported to many different places. The main credit score place/company is FICO. FICO is the main credit score companies and financial institutions use to determine how much money to lend you, how much interest rate to charge you, and if you will get a loan at all. Your FICO score will factor in heavily into their decisions, so it’s obviously important to have as high a FICO score as possible.
Another important thing about FICO scores is that you don’t have just ONE FICO score. There are 3 main credit reporting bureaus/agencies, and you’ve probably heard of them too. They are Experian, TransUnion, and Equifax. Each company will report your FICO score. So you’re probably wondering then which FICO score is the one a lender gets?
Well, FICO will report your credit score to companies and institutions that lend money based on the average of the 3 main credit reporting companies. Your credit score is a “live” entity, meaning it is something that changes constantly – depending on a number of factors. They can definitely all improve at a gradual rate as you become more and more responsible with debt, and therefore increase your trustworthiness with lenders and financial institutions.
So What Is The Highest Credit Score Possible?
The absolute HIGHEST credit score you can achieve is 850. FICO has a range of 350 (lowest score possible) to 850 (best credit score possible). Very few people have a credit score of 850. You will need to be very responsible with credit for a fairly long time in order to get and maintain that type of score.
However, the nice thing about credit scores is that you don’t need an amazing score to get low interest rates and big loans. If you are in the 751 – 850 range, you are in the “great-excellent” credit score range, and this is a great place to be. You will be favoured with the lowest interest rates and biggest loans possible – typically. Like this guy here, who has a credit score of 848. He is in the 1% of Americans with a score like this.
Getting a high credit score isn’t the most difficult thing to do. It just takes time and responsibility. You can start with a simple credit card or small revolving loan (like a line of credit). Use it every month, even if its for $50, and pay it off every month. The act of doing this CONSISTENTLY will help improve your score. Whether you have bad credit right now or you are just starting out building credit, or if you have great credit, you need to do these types of things to raise your score or to continue to maintain a great credit score.
If You Have A Low or Medium Credit Score, It Doesn’t Mean You’re A Bad Credit Risk Necessarily
If you have a bad credit score, it doesn’t automatically mean you will default on a loan. Credit scores are all about RISK. The lower your credit score, the higher the chances you will default on a loan, but this is based solely on statistics that FICO has gathered. It doesn’t mean YOU yourself will necessarily default. So it’s really important to get that high credit score to avoid being grouped in with the other people who are more statistically likely to not pay back a loan.
Getting The Highest Credit Score Possible Doesn’t Really Matter
At the end of the day, having a score of 850 feels pretty damn good and it’s something I guess you can brag to your friends and family about. I think I would if I had an amazing score like that too. But it’s kind of a weird goal to try and achieve in my opinion. Your FICO score is a constantly changing thing and how Fair Isaac Corp calculates your FICO score is something they keep to themselves, and it’s also something that changes over time too.
If you have a FICO score of about 780+, you are in the excellent category and you’re already doing great. You can apply for the best credit cards that give you the best rewards. These credit cards will also be the more premium ones to qualify for, and require excellent credit to get.
You’ll also be able to get home loans at the lowest interest rates available. Not only that, lines of credit, car loans, or any type of loan really should come to you at the best rates. Not only that, a great credit score can help you secure a larger loan – though this is also very dependent on how much income you are generating and what other outstanding loans you have at the moment.
How Do You Get The Best Credit Score?
Well, there isn’t really an exact formula to get a FICO score of 850. I have a very very high credit score and have always gotten favourable rates and big loans on my line of credit and credit card limits. I don’t do anything special. My keys to getting a great credit score is pretty simple. Use credit monthly and pay it back in full every month.
For example, my main credit card gets used every month. I also have a line of credit that gets used every month. I never carry a balance on my credit card. It gets paid in full every month. My line of credit I typically don’t use. So I just leave $10 in there and pay the interest (it’s like 3 cents a month) every month. This way, I am “using” my line of credit every month and I pay the interest every month. Since the balance is so low it does not hurt my credit score, it actually helps it. If I had a balance of $25,000 on it and just paid the interest, then this would more than likely hurt me because I am carry a huge balance on my line of credit, which is a big factor in the calculations of your FICO score.
I’ve been doing this consistently since I turned 18 and was only enough for a credit card. And since I was really young, I’ve had a great score and it’s never gone down. So for you, I would focus on using credit every month and paying it in full monthly. It’s the best way to build your credit up and get a perfect credit score – if that’s what you’re after. If there’s another better way please let me know!
I don’t want to disclose my credit score publicly, but it’s pretty damn impressive and it’s been that way for a very long time. It just takes time to get there, but it isn’t any rocket science. So if you have poor credit or just want to increase your credit as high as possible, you can absolutely do it!
What about you? What’s your credit score like and what is your credit score goals? Let me know in the comments below!